M&A Transactions: Avoid Surprises From the IRS
If you’re thinking of buying or selling a business, or you’re in the process of a merger or acquisition, it’s important both parties report the transaction to the IRS in the same way. Otherwise, you may increase your chances of being audited. If a sale involves business assets (as opposed to stock or ownership interests), the buyer and the seller must generally report the purchase price allocations that both use to the IRS. This is done by attaching IRS Form 8594, “Asset Acquisition Statement,” to each of their respective federal income tax returns for the tax year that includes the...
Read MoreYou May Have to Pay Tax on Social Security Benefits
During your working days, you pay Social Security tax as part of the withholdings from your salary or self-employment tax. You may be surprised to learn that when you start receiving Social Security benefits some of the payments may be taxed. If you’re getting close to retirement age, you may be wondering if your benefits are going to be taxed. And if so, how much will you have to pay? The answer depends on your other income. If you are taxed, between 50% and 85% of your payments will be hit with federal income tax. (There could also be state tax.) Important: This doesn’t mean you pay 50% to...
Read MoreBartering: A Taxable Transaction Even if Your Business Exchanges No Cash
Bartering for goods and services instead of paying cash may be beneficial to some small businesses. If your business engages in bartering, be aware that the fair market value of goods you receive in bartering is taxable income. If you exchange services with another business, the transaction results in taxable income for both parties. Income is also realized if services are exchanged for property. For example, if a construction firm does work for a retail business in exchange for unsold inventory, it will have income equal to the fair market value of the inventory. Barter clubs Many business...
Read MoreIf Your Kids Are Off to Day Camp, You May Be Eligible for a Tax Break
Now that most schools are out for the summer, you might be sending your children to day camp. This is often a significant expense, but the good news is that you might be eligible for a tax break for the cost. The value of a credit Day camp is a qualified expense under the child and dependent care credit, which is worth 20% to 35% of qualifying expenses, subject to a cap. Note: Sleep-away camp does not qualify. For 2019, the maximum expenses allowed for the credit are $3,000 for one qualifying child and $6,000 for two or more. Other expenses eligible for the credit include payments to a...
Read MoreWhich Entity Is Most Suitable for Your New or Existing Business?
The Tax Cuts and Jobs Act (TCJA) changed the landscape for business taxpayers because the law introduced a flat 21% federal income tax rate for C corporations. Under prior law, profitable C corporations paid up to 35%. The TCJA also cut individual income tax rates, which apply to sole proprietorships and pass-through entities, including partnerships, S corporations, and LLCs (treated as partnerships for tax purposes). However, the top rate only dropped from 39.6% to 37%. These changes have caused many business owners to ask: What’s the optimal entity choice for me? Entity tax basics Before...
Read More2019 Q3 Tax Calendar: Key Deadlines for Businesses and Other Employers
Here are some of the key tax-related deadlines affecting businesses and other employers during the third quarter of 2019. Please, keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to your situation. Contact us to ensure you meet all applicable deadlines and to learn more about the filing requirements. July 31 Report income tax withholding and FICA taxes for the second quarter of 2019 (Form 941) and pay any tax due. (See the exception below, under “August 12.”) File a 2018 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or...
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